GRAN COLOMBIA GOLD ANNOUNCES FINANCIAL RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2010 AND OPERATIONAL UPDATE
TORONTO, Nov. 29 /PRNewswire-FirstCall/ - Gran Colombia Gold Corp. (TSX-V: GCM) announced today the release of its unaudited consolidated financial results for the three and nine month periods ended September 30, 2010, together with its Management's Discussion and Analysis ("MD&A") for the corresponding periods. These documents are posted on the Company's website at www.grancolombiagold.com and on SEDAR at www.sedar.com. All financial figures contained herein are expressed in U.S. dollars unless otherwise noted.
Maria Consuela Araujo, Chief Executive Officer, commented: "This quarter our focus has been to ramp up production and continuing with the modernization of the operating facilities at the Gran Colombia mine, (formerly known as "Frontino"). We have made important progress in mine development, equipment upgrades, identification of work fronts and execution of the exploration tunnel and the drill program. Our exploration and early production projects are on schedule and we expect great things from each of them. We have also made progress with social initiatives, including a vision care program and community infrastructure project instituted this quarter. These commitments support our strategy of cultural change and long-term cost and productivity improvement."
The Company's financial performance this quarter reflects the completion of the public listing through a reverse takeover transaction ("RTO"), the acquisition of a 95% interest in the Gran Colombia operating mines and immediate commencement of operational improvements, and initiation of the Company's commitments to social initiatives. The Company ended the quarter with a positive cash balance of $43.3 million.
Following the August 19, 2010 acquisition of the Gran Colombia mines, there was a two-week transition period during which employees were hired by the Company, provided with training and given the opportunity to benefit from a vision care program as part of the Company's social initiatives. The Company incurred $1.2 million in mine transition expenses during this period in which no mining operations were conducted. The Company's production during the 25-day operating period starting September 6, 2010 amounted to 1,987 ounces of gold and 1,663 ounces of silver from 8,190 tonnes mined. Gold grades averaged 8.6 grams per tonne and recoveries were 87.8% as expected. During the three months ended September 30, 2010, the Company generated $2.2 million in total revenues, principally from the sale of 1,544 ounces of gold from the Gran Colombia mines at prices averaging $1,272 per ounce. The Company is currently unhedged to the rising gold price environment.
For the three month period ended September 30, 2010, the Company reported a net loss of $12.1 million or $0.10 per share. The loss for the quarter largely reflects the $9.8 million stock-compensation expense recorded in connection with the initial grant of 10.3 million vested stock options to directors, management, employees and consultants following the RTO. The quarter's loss also reflects a $2.0 million loss from mining operations at the Gran Colombia mine, from the mine transition expenses noted above and from lower than normal productivity as mining operations were re-started and operational improvements were made. The net loss for the period from incorporation on January 4, 2010 to September 30, 2010 amounted to $12.7 million or $0.25 per share.
During the third quarter, the Company secured drilling contractors for the exploration program in all of its projects this quarter and is moving ahead with a budgeted and fully capitalized exploration program detailed below.
Production Portfolio
Management is focused on realizing operational and exploration milestones to bring its Gran Colombia mines and El Zancudo project into full production. Drilling campaigns are underway at the Gran Colombia mines and the Zancudo project. At the Gran Colombia mines, an initial 30,000 metres of diamond drilling has been contracted as a first phase, with a commitment to drill an additional 30,000 metres. The initial drilling campaign is focusing on several veins in the southern part of the Gran Colombia property, along a strike of 4.5 kilometres and to a depth of 180 metres as well as the Cristales and San Nicolas veins in the northern portion of the Gran Colombia property.
The 6 kilometre tunnel planned to go across the principal formations in the property has been contracted to Mincivil S.A. for an investment of approximately $9 million and construction has started on this tunnel. A diagram of the tunnel can be viewed on the Company's website at www.grancolombiagold.com.
At the existing operating mines (El Silencio, Providencia and Sandra K), the drilling campaigns include the southern and northern portions of the Sandra K mine, the southern portion of the El Silencio mine and below level 11 of the Providencia mine. These areas are all well-known mineralization and alteration zones with a long history of production. To date, 810 metres and five drill holes have been completed with depths from 153 to 402 metres. Samples from the drill holes have been processed and are being assayed. Currently, there are three drill rigs operating on the Gran Colombia property, with three additional drill rigs to start operating in each of January, February and March 2011, respectively.
At the El Zancudo project, a 17,000 metre diamond drilling program (including 5,000 metres of underground drilling) started at the end of October, with 170 metres already drilled (two holes, underground) and a third hole is being drilled. Thus far, 97 samples have been sent for assaying. The Independencia underground mine at El Zancudo received a full 1,200 mere rehabilitation. Six fronts are being worked and are now fully operational (four for mining and two for development).
Infrastructure Developments
Progress at the Company's milling facilities, known as "Maria Dama", is continuing. The Company has invested approximately $0.6 million in refurbishment initiatives including crushing facilities and two secondary grinders as well as the rebuilding of the two largest thickeners and two flotation cells, and the rewiring of electric cable in four areas of the mill.
This quarter the Company began purchasing ore from its small scale mining contractors at the CIIGSA smelting facility. This will increase production and ensure environmentally compliant processing of such ore. The Company has capacity to handle 7,500 kilograms ("kg") of gold and 20,000 to 25,000 kg of silver. This smelter is fully permitted. The Company expects to close the acquisition of a 60% equity stake in CIIGSA in early 2011.
The hydroelectric plants on the property have been serviced and repaired. The Company invested approximately $0.3 million and the plants are working at approximately 85% capacity. The Company continues to evaluate energy outsourcing opportunities.
Exploration
At the Segovia property, 6,000 metres of diamond drilling were conducted in October, of which 740 metres have been drilled in six holes completed to date. A total of 142 samples have been sent for assaying. In addition, access and geological mapping of 30 kilometres of IP ("Induced Polarization") lines have been prepared and the actual geophysics work is scheduled to start in December 2010. In addition, at the Segovia Gran Colombia vein, the mine portal has been rebuilt and 183 metres of tunnel have been rehabilitated.
At the Concepcion property, 1,000 hectares of surface geological mapping has been completed, covering 80% of the interest area and 180 metres of geological detailed sampling has been performed. The location for twelve drill holes has been prepared and a diamond drilling contract for 4,000 metres will be signed before the end of the month, for drilling to start in January 2011.
At the Mazamorras property, a 30,000 metre drilling campaign is to be contracted in the next few days, to start drilling the second week of January; and all environmental permits for drilling, including water concessions, are in place. Substantial progress has been achieved in the delineation of the drilling areas of the property and platform preparation for the first 20 to 27 drilling sites. The contract for geophysics work (IP and magnetometric survey) for the whole property is in for restart in the fourth quarter.
About Gran Colombia Gold Corp.
Gran Colombia Gold Corp. is a Canadian-based gold and silver exploration and development company focused on acquiring, developing and operating properties of merit in Colombia. The Company holds 95% of the former Frontino gold and silver assets, including the largest underground gold and silver mining operation in Colombia. It also owns four more exploration projects in Colombia for total exploration acreage of approximately 21,400 hectares. The Company is committed to implementing its exploration and development strategy with a comprehensive environment, safety and community program, meeting international standards of best practice.
Forward Looking Information:
This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Gran Colombia to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and Gran Colombia disclaim, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
SOURCE Gran Colombia Gold Corp.
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